a. The benchmark yield is outperforming the company’s bonds.
b. The company’s borrowing cost increases.
c. The company’s bonds are outperforming the benchmark yield.
d. The company’s borrowing capacity will become more restrictive.
Answer:- c. The company’s bonds are outperforming the benchmark yield.
When a corporation’s corporate spread tightens, this refers the company’s bonds are outperforming the benchmark yield. Yield spreads can be implemented to help predict downturns and economic retrievals, and may specify how investors view economic conditions. Widening spreads typically result in the positive yield curve, representing stable economic conditions in the future. The narrowing of yield spreads (between bonds of different risk ratings) implies that the marketplace is factoring in less risk, perhaps due to an improving monetary outlook. The TED spread is one commonly-quoted credit spread.
Bond credit spreads are frequently a good barometer of monetary health—widening (bad) and narrowing (good). A credit spread can likewise mention to an options plan where a high premium option is written and a low premium option is bought on the similar underlying security.
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